Equifax Finance Blog » Ilyce Glinkhttp://blog.equifax.com
Thu, 30 Jul 2015 12:00:42 +0000en-UShourly1http://wordpress.org/?v=4.2.3Paying for Home Renovations: Tapping Home Equity vs. Using Savingshttp://blog.equifax.com/real-estate/paying-for-home-renovations-tapping-home-equity-vs-using-savings/
http://blog.equifax.com/real-estate/paying-for-home-renovations-tapping-home-equity-vs-using-savings/#commentsWed, 22 Jul 2015 12:00:08 +0000http://blog.equifax.com/?p=12869Figuring out how to pay for a home renovation is one of the first steps in any remodeling process.

When they’re done wrestling with the cost of a home renovation, most homeowners have to decide how to fund a remodeling project. And in some cases, the options can be paying for it in cash or borrowing against the equity they’ve built up in their home.

Interest rates are still historically low, and home values are punching upward, so taking out a home equity line of credit (HELOC) or home equity loan may seem like a sensible financial move.

But it’s not always.

“It really depends on your specific circumstances,” says Greg McBride, chief financial analyst for Bankrate.com. “How much equity do you have, how much are you looking to borrow, and what’s your overall debt and savings picture?”

The differences between a home equity loan and a HELOC

A home equity loan and a HELOC are similar, but they are not the same. A home equity loan is like a mortgage: It’s issued for a specific amount, and you must repay it over time with fixed monthly payments. A HELOC, on the other hand, is a line of credit that you can use as needed, up to your credit limit. With a HELOC, you’ll still make monthly payments, but you may be able to make interest-only payments for a period of time.

Here are some questions you may want to consider asking and answering if you’re currently weighing a home equity loan vs. a HELOC to fund your home remodeling project:

1. How much other debt do you have?
This may be a bitter pill for many homeowners to swallow, but if you have other debt, especially debt that carries a high interest rate, you may want to evaluate and calculate whether you have the ability to take on additional debt at all. HELOCs and home equity loans need to be paid back.

“Any time you borrow, you have to look yourself in the mirror and truly assess why it is that you’re borrowing the money,” says McBride. “If you’re borrowing money simply because you’re not able to afford it based on your earnings, or if you’re carrying credit card debt, the last thing you need to be doing is borrowing more. Focus on getting that debt down.”

Barring immediate, necessary repairs, many renovations are elective.

2. How much equity do you have in the home?
If you don’t have 20 percent equity in the home, you may want to think twice about borrowing against it. There are a few reasons for this. First, if you recently purchased the home and are still making your way to 20 percent equity, you may be paying private mortgage insurance or PMI. You may want to work toward eliminating that payment first.

Second, most lenders still want you to have some stake in the home, so many will not allow you to borrow under that 20 percent threshold (though McBride notes that some lenders are getting looser about this number).

Finally, you may want to think twice before putting yourself in a financially unstable situation if home values drop and you lose a significant amount of equity.

3. How much are you looking to borrow?
Because getting a home equity loan involves start-up costs similar to getting a mortgage—including an appraisal, an application fee, and closing costs—you may want to ensure that the amount you’re borrowing is worth the cost of borrowing it. You may also be charged additional fees for maintaining the loan.

Also remember that many home equity loans carry adjustable rates, so your monthly payment may go up and become less affordable over time.

4. How much cash do you have?
If you have a significant amount of equity in your home, but not a lot of cash—you are investing your income, for example, and are protective of your emergency fund—then getting a HELOC or home equity loan may not be a bad option. Interest rates are low, so for many, this is one of the most cost efficient ways to borrow money right now.

If you have a lot of cash (and healthy emergency savings), you may want to consider whether it’s smart to borrow unnecessarily.

5. How long will you stay in the house?
If you’re planning on selling shortly after finishing the renovations—and before you have a chance to start making a dent in the loan—then using your savings responsibly may be a viable solution. Because you’re using your home as collateral, you will generally have to pay back the loan in full when you sell and that collateral disappears. You should expect to make enough money from the sale of the home to pay back the loan or have some other means of paying it off. This also doesn’t mean you can wipe out your savings making the renovations; having some liquid cash to access for emergencies is important.

Keep in mind that HELOCs have draw periods, after which you cannot take out any more money and must begin paying back the loan in earnest. So even if you stay in your home, you must be able to repay the loan over the long term.

Always keep ROI in mind
In the end, regardless of whether you use cash or a home equity loan, make sure your enjoyment of the renovations process and its results makes the return on your investment worthwhile.

Ilyce Glink is a best-selling author, real estate columnist, and web series host. She is the managing editor of the Equifax Finance Blog and CEO of Think Glink Media. Follow her on Twitter: @Glink.

Just like every other part of the home-buying process, this decision requires research, comparison shopping, and careful consideration. Your homeowner’s insurance provides broad coverage for damage to your house (unless specifically excluded in your policy), as well as coverage for personal liability exposures which may arise from being a homeowner, so it’s important to choose wisely.
Start thinking about insurance early

When you first start looking for a home, you have to do a lot of calculations about monthly costs, including determining what you can afford. But to figure out the true cost of your home purchase, you’ll also need to know how much taxes and insurance will cost. Typically these are bundled with your mortgage payment to comprise your monthly payment.

You can look up average rates in your state, but the cost of homeowner’s insurance is hard to estimate. You will likely need an actual address to get a quote, says Laura Adams, senior insurance analyst for InsuranceQuotes.com, a website that helps users shop for insurance. Agents typically need extensive information on a property before they can estimate the cost of insurance.

Different factors affect rates, particularly the type of structure (brick, concrete, wood frame, and so on), the square footage, the age of the home, and the exact area where the home is located.

“We’re looking for good guts,” says Camilla Jarman, an insurance agent with American Family Insurance in Milwaukee. “We want to see good plumbing, electrical, roof, furnace, and foundation.”

Typically, you will see the following areas of coverage:

Property damage, including your dwelling, other structures not attached to your home, (such as a garage), and personal property inside your home.

Loss of use. This covers living expenses in case you cannot use your property, such as when it is being repaired.

Personal liability. This will protect you against claims resulting from accidents on your property.

Medical expenses. This can offer coverage for injuries that occur on your property.

Decide what coverage you need

Once your offer on a home has been accepted, you’ll want to determine how much coverage you need.

While it might seem attractive to go with a larger deductible and less coverage—and therefore pay less—if disaster strikes, you could wind up being responsible for the difference between what’s covered and what you owe for repairs. You may want to consider starting with a policy that costs a little more but offers more coverage; you can always change it later.

Also, make sure you know if the policy covers replacement cost or actual cash value. Replacement cost is the amount it will take to repair or rebuild your home without deducting for depreciation, while actual cash value takes depreciation into account. Actual cash value coverage may be a way to save money on your policy, but it could hurt in the long run if disaster strikes.

Be sure to ask your agent about flood and earthquake insurance if you live in a high-risk area. These natural disasters are generally not covered by a standard homeowners insurance policy.

Shop around

Different insurance companies weigh factors in different ways, says Adams, so you’ll want to get more than one quote. It’s important to keep in mind that insurance companies typically use a credit-based insurance score, so that can shift offers as well.

Start with the company where you have auto or renter’s insurance and solicit recommendations from your lender. You may want to ask family and friends for their input as well. Then call around for a few quotes to find the best deal.

“You also definitely want to ask about discounts and leave that open-ended; don’t just ask about specific discounts,” Adams says. “Every insurance company offers a different set.” For example, you may get money off for adding a security system, for being a nonsmoker, or for bundling with your auto insurance.

Insurance rates can vary, but according to a National Association of Insurance Commissioners survey released at the end of January, the national average for insurance premiums hovers around $1,000 a year, spanning from $2,084 in Florida to $538 in Idaho.

Keep in mind that you’ll need to prove you have homeowner’s insurance before you close on your new home, so don’t wait until the last minute to decide on coverage. Typically, you will need your insurance binder (a temporary insurance policy) and paid receipts at least seven to 10 days prior to closing.

Ilyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!

]]>http://blog.equifax.com/real-estate/homeowners-insurance-tips-for-first-time-homebuyers/feed/7The Real Value of $100 in Your Cityhttp://blog.equifax.com/family-money/the-real-value-of-100-in-your-city/
http://blog.equifax.com/family-money/the-real-value-of-100-in-your-city/#commentsThu, 26 Mar 2015 16:12:48 +0000http://blog.equifax.com/?p=12158Americans can be extremely passionate about the region of the country in which they live. Chicagoans and New Yorkers will spar over which city has the best pizza, while Kansas City residents will argue about barbeque all day long with people from North Carolina. No matter your loyalty to your city, if you’re talking dollars and cents, there are some clear winners in terms of the least expensive places to live.

Recently, the Tax Foundation, a Washington, D.C.-based organization that collects data and publishes research studies on tax policies at the federal and state levels, created a map that shows the real value of $100 in different U.S. metropolitan areas. Based on data from the U.S. Bureau of Economic Analysis, the data shows that it is more costly to live in some places than others. Honolulu was the most expensive city, where $100 is only worth about $81.37 in value, based on the costs of land and consumer goods. But in Mississippi, $100 is worth almost 40 percent more than in Washington, D.C.

What influences how much $100 is worth?

In order to determine how much $100 is worth in metropolitan areas, the U.S. Bureau of Economic Analysis creates a so-called “fixed basket” of consumer goods in order to give a sampling of how much it costs to live in a particular place. Items in the basket include everything from breakfast cereal to new vehicles to pets and pet products.

Alan Cole, an economist with the Tax Foundation and one of the authors of the study and creators of the map , says that “essentially, the Bureau of Economic Analysis goes out shopping” in order to compare how the cost of items, such as food, clothing, furniture, and services, vary across the country. The two most important elements of the basket are housing costs and gas prices, according to Cole.

“In an area where you see expensive houses, you will see a lot of other expensive things,” Cole says. That’s because if the land is expensive, home prices go up, rent increases, and it is also more costly to start a business. Consequently, manufacturers will charge more for goods in order to meet a higher profit margin needed to pay the rent. Housing prices affect almost everything else.

Gas prices are also essential because of the cost of transporting goods. “It’s not just about what you pay when you fill up your car—anything that needs to be sent to you and anything that needs to be built costs money to ship,” Cole says. Shipping expenses make a place such as Hawaii extremely expensive because imports typically require a lot of gasoline. The closer you are to Texas and the Gulf Coast, where most of the oil comes in, the lower the shipping costs you will pay, Cole says.

Policy differences also play a role in the costs of living because state income taxes and property taxes may add a few more dollars onto the already-expensive housing costs.

Should you relocate to another area of the country?

Your ability to succeed in a different region of the country will depend heavily on your income and personal consumption habits. “If you want a big yard, you’ll have to pay two or three times more to get one in New York, than in Tennessee, for example,” Cole says.

He suggests that before making a move just to save money, you should first evaluate the job opportunities that are available to you.

If you find a job that pays you $40,000 a year in a place like Kansas City, it could provide a comfortable living there. If you were making that same amount in a bigger city, “you’d be struggling to get by and pay the rent,” Cole says.

Cole notes that there’s usually not a huge wage difference between rural areas and cities for the same job. However, there is typically a larger variety of positions available in big cities. Additionally, large metro areas often allow for specialization across different fields, and that can eventually drive up the costs of land and living. If you could specialize in a certain type of work, your income might go from $40,000 in Kansas City to $60,000 in Chicago, where there are typically more opportunities.

It takes more than money to make a home, but spending less may help you have more of a house. If you consider moving to a place with more income opportunities, you may discover new possibilities for your career. On the other hand, the value of inexpensive land and a less expensive lifestyle may help you plan a future for a new family or aging relatives.

Ilyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!

]]>http://blog.equifax.com/family-money/the-real-value-of-100-in-your-city/feed/0Which Debt Should I Pay Off First?http://blog.equifax.com/credit/which-debt-should-i-pay-off-first/
http://blog.equifax.com/credit/which-debt-should-i-pay-off-first/#commentsThu, 26 Mar 2015 16:11:54 +0000http://blog.equifax.com/?p=12137When you’re facing many different types of debt, deciding which one to focus on first can be a daunting task. As you formulate your plan to pay off debt, consider the following four tips to help you stay motivated and on track.
]]>From medical debts to student loans, Americans are struggling to pay off around $3 trillion in consumer debt. In addition, according to a study from the Urban Institute, which analyzed the credit files of 7 million Americans, more than one-third of Americans with a credit file have accounts in collections.

“Personally, I don’t like that feeling of owing this debt—I don’t like someone calling me at eight in the morning about a bill,” says Deborah Blount, an Atlanta resident who has struggled to pay off tax debts, medical bills, and credit card accounts.

It’s difficult to know how to begin rebuilding your finances when you’re facing different types of debt. The first step to paying off debt is to understand your situation and what type of debt you owe.

What are the different types of debt?

There are different types of debt: the two most common types are revolving accounts and installment accounts. Their impact on consumers will vary, depending on the interest rate — the finance fee you pay for the use of the money you borrow. (There are also single pay notes, where there are no monthly payments but the entire sum is due at the end of the loan; an interest-only loan, where only interest payments are paid for a fixed period of time and the principle is paid off on a future date; and balloon loans, which have low monthly payments and a large payment—the balloon payment—due at the end of the loan period.)

Typically, credit cards have a higher interest rate and are categorized as revolving accounts.

Installment accounts, on the other hand, are credit accounts where the amount and number of payments are predetermined, such as a car loan, student loan, or a mortgage. (Mortgage accounts, such as first mortgages or home equity loans, are debts secured by real estate and are listed separately on your Equifax credit report.) Because installments are predetermined payments, some advisors suggest paying off revolving accounts with higher interest rates first. For example, if you have student loans and credit cards, putting more money toward the credit card may save you from overpaying in interest.

“Almost always, the consumer debt is the first to address because of the higher interest rate,” says Art Lundgren, a financial planner with Lake Country Financial Planning. Generally, the debt with the highest interest rate will cost you the most over time.

Other advisors suggest paying down the smallest debt first, says Gail Cunningham, the media relations manager for the National Foundation for Credit Counseling (NFCC). “You’ll have that sense of accomplishment, which may be what you need to make it to the finish line,” says Cunningham.

Whether you’re tackling revolving or installment debt, consider the following four tips to stay motivated and on the right financial track:

1. Know what you owe and plan your payback.
“Every day, the interest and penalties are growing. You need to find out what you owe so you can get a grip on it,” says Blount. In her case, the calls from debt collectors made her realize she needed to figure out her debt scenario.

“If you don’t know what you owe, you can’t fix it,” Blount explains. Even if you can’t afford to pay off your debt immediately, knowing your situation will help you make the minimum payment, monitor your accounts, and make a plan to pay it back.

Start by tracking your expenses for at least two months; you won’t be able to cut back on your spending if you don’t know where your money goes. Once you track your spending, set a firm budget and only spend what’s allotted. Review your budget to see if there are any other expenses you can reduce. These choices can help gain control over your spending, rather than being controlled by your debts.

“After my divorce, I was left with $10,000 in tax debt,” says Blount. “Last year I paid that off, and that gives me that incentive to do it again.”

2. Reward yourself. Paying off long-term debts requires patience and persistence, so it helps to identify your motivation, Lundgren says. For some, that may mean paying off one debt as quickly as possible. For others, a fun activity after you achieve a goal may help you stay in the game.

“It’s really hard if you deny yourself everything, so make sure you give yourself small rewards once you reach a goal,” says Lundgren. For many, a debt-free future is the real motivation.

3. Ask for help.
According to Blount, the disrespectful attitude of some debt collectors can lead to discouragement. She recommends contacting non-for-profit agencies, such as American Financial Solutions, a member agency of the NFCC, for help.

Be sure to read reviews of the program you’re considering, Blount cautions. “It’s really important to do your research because there are a variety of programs that are just scamming people,” she says.

4. Pay the minimum payment.
Whether you start by paying off a small loan entirely or chipping away at a high-interest debt, it’s essential that you first pay the minimum for all your debts, Cunningham says. If you only pay one debt and neglect others, those other debts may go into collections. An account in collections will remain on your credit report for seven years plus 180 days from the start of the delinquency that led to the collection, and may impact your ability to borrow money in the future.

If you are in financial distress and are not able to make the minimum payment, contact the lender in advance of the due date — not once you’re already behind—and ask for an extension, says Cunningham. Some lenders also have programs that can help you pay back your loans and get on track.

Ilyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!

]]>http://blog.equifax.com/credit/which-debt-should-i-pay-off-first/feed/13What Does a Home Warranty Cover?http://blog.equifax.com/real-estate/what-does-a-home-warranty-cover/
http://blog.equifax.com/real-estate/what-does-a-home-warranty-cover/#commentsWed, 25 Mar 2015 12:00:12 +0000http://blog.equifax.com/?p=12094If you are looking to buy a home, you may have heard your real estate agent mention the home warranty as a selling point. Contrary to the name, home warranties don’t cover the actual structure of the house. Instead, a home warranty will help defray the costs if a major component in the house fails.

“It’s like having life insurance, it’s good for peace of mind,” says Frank Lesh, the executive director of the American Society of Home Inspectors.

What is a home warranty?

A home warranty is a contract between a homeowner and a warranty company that provides for discounted repair and replacement service on a home’s major appliances, such as the furnace, the air conditioning unit, and the plumbing and electrical systems. It may also cover other items, such as washers and dryers, garbage disposals, refrigerators, and swimming pools.

Homebuyers typically use a home inspection to ascertain the state of the appliances, but it may be tough to tell how the appliance has been used or if it will stay intact. A home warranty is financial protection against unforeseen repairs. It can cost from $400 to $600 a year and will cover the house from three months to a year, depending on the coverage plan. In addition to the yearly cost, the homeowner is responsible for a deductible or premium if he or she needs a service provider.

A home warranty can be particularly helpful for buyers purchasing an old home where the appliances may be faulty. “It provides comfort and peace of mind,” Lesh says, but it certainly isn’t a replacement for homeowner’s insurance.

How is a home warranty different from insurance?

“Insurance is typically [for] a catastrophic loss,” Lesh says. Homeowner’s insurance covers the house itself and your personal possessions in case of fire, theft, or damage from another cause, whereas home warranties offer discounted repairs to and replacement of broken mechanical components and appliances in a home.

What does a home warranty cover?

“A home warranty covers normal wear and tear, or if the thing just breaks down,” Lesh explains.

When an appliance breaks, the warranty company will send out a service provider to inspect the damage and determine whether or the not the repair is covered by the warranty. The service provider may fix the appliance immediately or the homeowner may have to pay a larger deductible, depending on the seriousness of the repair.

One notable exception: If a home inspector noted something as faulty before the house was sold, it is not usually covered by the warranty.

“You can’t expect them to replace a leaky water heater if the inspector noted the water heater is leaky,” Lesh says.

Often, a real estate agent or seller will purchase a home warranty as a selling tool. As soon as the home is sold, the warranty coverage will transfer to the next homeowner, thereby offering the new owner more coverage. Newly built homes generally have a one-year warranty when they’re sold.

In the case of an old home, which may not have a warranty, purchasing one may offer some financial security because a warranty is typically far less expensive than replacing an appliance. (However, with a home warranty, the homeowner doesn’t get to control the brand of replacement appliance or how an appliance is fixed.)

“I always tell my clients to have a re-inspection 11 months after they move in because that’s usually just when the warranty is up and they can see the status of everything,” Lesh advises.
When deciding whether to purchase a home warranty, thoroughly inspect the terms of your agreement. The coverage and the cost of the deductible will change depending on the plan.

“With a home warranty, it doesn’t matter what happened so long as it is covered in the terms of the agreement,” Lesh says, “but you have to read the fine print.”

Ilyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!

Ideally, this doesn’t just mean contacting a bank or two. It also means talking with different types of lenders and brokers. But, frankly, it can be hard to tell the difference between these options—particularly between a mortgage banker and a mortgage broker.

In fact, while you’ll often see those two terms used interchangeably in the media, they’re not quite the same.

“A mortgage broker is very similar to a mortgage banker or even a bank in the consumer’s eyes,” says John Councilman, president of the National Association of Mortgage Brokers.

Both will look at your income, down payment, and credit history to try to determine the best mortgage for you at the best rate. Though the customer service and loan offer may vary, the borrower’s experience with each is likely to be similar.

“The key difference is that mortgage bankers and banks must establish lending guidelines applicable to their particular institution or organization,” Councilman says. “The mortgage broker is able to analyze the borrower’s situation to ascertain which lender’s programs best fit the borrower.”

Comparing mortgage brokers, mortgage bankers, and banks

A mortgage broker is sort of a middleman between you and a number of different lenders, while a mortgage banker is more of a one-stop shop for all of one lender’s products, says Tamara King, associate vice president of loan production for the Mortgage Bankers Association.

Most lending institutions follow rules set out by mortgage giants Fannie Mae and Freddie Mac and by the Consumer Financial Protection Bureau. But beyond that, each bank may have separate rules and guidelines that dictate the interest rates and terms of the mortgages it offers, as well as which buyers qualify for them. This is why it is recommended that you shop around for a mortgage—when you shop for different loans, you will get different offers. A mortgage broker can help facilitate this shopping process by looking at a number of different lenders’ options and seeing which loan is right for you.

Both mortgage brokers and mortgage bankers are trying to find the best fit among the products available to them, King says. However, the experience in working with each may be a little different.

Independent mortgage bankers, which focus exclusively on mortgage lending, are typically smaller, regional companies. They usually borrow the money for your home loan from larger lenders and focus on government-backed loans such as Federal Housing Administration and Veterans Affairs loans, according to the MBA.

Mortgage brokers tend to be even smaller and more localized. Usually, only one or two people operate the broker company, and all the products they offer are coming from banks or mortgage bankers.

This leads many people to assume that a bank is the cheapest option because there’s no middleman between you and the money. That’s not always true.

“Most mortgage brokers are paid by the lender in a fashion not dissimilar to what the lender would pay one of [its] own branches,” Councilman says.

When you’re looking for your first home loan, it’s important to look around at all these different options—not just at different lenders within a single category.

You can frequently make this process easier by simply calling different lenders and brokers and running some of your information past them to get a taste of what they can offer. Each category offers a slightly different flavor, and borrowers should consider the rate, fees, and personal service provided by each to get the best deal. A home is probably the biggest purchase of your life, so shop around until you find the right loan for you. You may want to consider meeting with a lender of each type—a large bank, a smaller regional bank, and a mortgage broker—to see what each can offer you.

Ilyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!

]]>http://blog.equifax.com/real-estate/mortgage-brokers-vs-mortgage-bankers/feed/2Everything You Wanted to Know About an All-In-One Mortgagehttp://blog.equifax.com/real-estate/everything-you-wanted-to-know-about-an-all-in-one-mortgage/
http://blog.equifax.com/real-estate/everything-you-wanted-to-know-about-an-all-in-one-mortgage/#commentsFri, 20 Mar 2015 12:04:04 +0000http://blog.equifax.com/?p=12042If you own a home, your mortgage is one of your biggest debts. An all-in-one mortgage can help you pay down this debt more quickly, but you’ll want to be sure you’re a responsible borrower before opting for this type of loan.
]]>It’s a dilemma many homeowners face: I want to put more money toward my house so I will pay less interest in the long term, but I also want to keep cash on hand in case an emergency crops up and I need it in the short term.

The all-in-one mortgage or “accelerator mortgage” is designed to solve that problem. Popular in England and Australia, where the laws there make it a more popular option for saving money on taxes as well, the all-in-one mortgage is a fairly new and niche option in the United States.

How an all-in-one mortgage works

An all-in-one mortgage combines your checking and savings accounts, mortgage, and home equity line of credit (HELOC) in a way that allows you to take your extra income and put it toward paying off your house. The savings account is effectively your home—but with a much higher rate of return.

You use the checking account from an all-in-one mortgage exactly the same as any other—deposit your paycheck, pay your bills, buy groceries, and so on—but it’s tied to your mortgage loan. All your surplus income goes toward your home mortgage.

“That’s the selling point, that you’re going to pay off that balance more quickly—as long as you’re spending less than you’re earning,” says Greg McBride, chief financial analyst at Bankrate.com.
The benefits of an all-in-one mortgage

While you can pre-pay your home mortgage without an all-in-one mortgage, once you send that extra money to your lender, you no longer have access to it. You could take out a home equity loan, but it won’t offer the kind of flexibility and instantly liquidity that an all-in-one mortgage does.

“It’s a good tool for people who are disciplined and want to pay down their mortgage more quickly and are afraid they may have an unexpected need for money,” says Nessa Feddis, the American Bankers Association’s senior vice president and deputy chief counsel for consumer protection and payments.

Feddis adds, “The attraction of this is that some people may hesitate to pay down the mortgage out of a fear they may need the money in an emergency—maybe they’re afraid they’re going to lose their job or the car breaks down or a child is going to be going to college, and they want access to funds if they need it. And if they don’t, they pay less interest.”

Considerations when looking into an all-in-one mortgage

For the responsible, an all-in-one mortgage loan is not a bad deal.

As long as you are spending less than you earn and allowing that excess to go to your mortgage, you will save money on interest.

However, if you’re constantly overspending or borrowing from your HELOC frequently, you could actually be making your situation worse. It could take you even longer to pay down your mortgage, and you could spend more money in the long run because you’re paying more interest. Plus, there are frequently upfront points or annual fees involved.

A final word of caution: There are plenty of financial experts who question the wisdom of putting any extra money toward your mortgage at all.

“What grabs people here is the cumulative savings over the life of the loan,” McBride says. But with today’s low interest rates, McBride suggests that you may be better off putting that money to work in other ways, such as through a 401(k) plan or an IRA that creates a nest egg that’s much bigger than what the interest saves.

Ilyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!

]]>http://blog.equifax.com/real-estate/everything-you-wanted-to-know-about-an-all-in-one-mortgage/feed/4What to Do If You’re Rejected for a Mortgagehttp://blog.equifax.com/real-estate/what-to-do-if-youre-rejected-for-a-mortgage/
http://blog.equifax.com/real-estate/what-to-do-if-youre-rejected-for-a-mortgage/#commentsFri, 30 Jan 2015 12:26:17 +0000http://blog.equifax.com/?p=11759Getting turned down for a mortgage can be disappointing and leave a person wondering what to do next. And while it may feel like an isolated, personal experience, it’s actually more common than you might think.

According to the Federal Reserve, in 2013, approximately 14.5 percent of applications for home mortgages were denied, down from over 18 percent in 2007.

Being rejected for a mortgage can be a part of the process, says Richard Verrillo, housing relationship manager for Navicore Solutions, what is important is how you choose to react after it happens.

Determine the reason for the rejection

One of the first things to do after you’ve been turned down for a mortgage isunderstand why it happened in the first place. For example, one common reason for mortgage rejection is a high loan-to-value ratio (LTV). Your LTV comes from the loan amount you requested divided by the appraised value of the home. Many lenders limit how high the LTV can be, so if the appraisal comes back too low, your application will likely be rejected, Verrillo says.

Another possibility is that your yearly income is too low for the loan amount requested. If you already carry sizeable debt, the lender may doubt your ability to make payments.

Verrillo also says that having credit issues or a lack of credit history is a common reason for mortgage rejections. Many lenders have minimum credit score requirements that could rule you out right away.

You will typically receive a letter in the mail outlining the general reason for your rejection. However, speaking directly with the lender can help you understand the specifics of your situation. Once you know the reason you can take the appropriate steps.

Consider different loan types

If you applied through a bank or private lender, consider a government-backed mortgage. For example, an FHA loan, insured by the Federal Housing Administration, can offer better financing options than traditional mortgages, such as a 3.5 percent down payment and a much higher limit for LTVs.

Details like these can make it easier to secure a mortgage, but be aware of what else comes with different loan types. FHA loans require borrowers to purchase mortgage insurance to protect the government against default. If these added costs push your payments past what you can afford, it may not be your best option.

Seek out different lenders

After an experience with mortgage rejection, you might not be thrilled to go back to the same lender and try again. The good news is that you can work with another lender if you’d like.

Each lender can have different requirements, according to Verrillo, so you should always shop around. While one lender might reject you, you may be able to find another that will accept the same application.

Clean up your credit file

If your mortgage was rejected due to your credit history, ordering your credit report (each year, you can request one free copy of your credit report from each of the three CRAs) and inspecting it can be a great idea. Doing so can show you how your credit behavior appears to lenders. There are many factors that can affect your credit score and your image as a borrower. Your lender likely has a minimum credit score requirement that you may not have met.

You may need to improve your credit behavior, which can take time, according to Verrillo. The good news is that when you apply again, a cleaner credit file can bring many benefits to you, such as a lower mortgage rate.

Find a cosigner

Another option may be to enlist the help of a cosigner. A cosigner is someone who applies for the mortgage with you and is just as responsible as you are for the contract, though he or she may not actually live in the house with you. If the lender views your cosigner as an attractive borrower, it could help you secure a mortgage.

The trouble with using a cosigner can come from the financial situation of the person you’ve chosen to be your cosigner, according to Verrillo. For example, your cosigner may already have a mortgage, making another 30-year commitment too much of a burden.

A mortgage rejection might feel like the end of the world, but it doesn’t have to be. Educate yourself on why it happened and take the appropriate steps to become a more attractive borrower. That way you may be able to make your dream of owning a home into reality.

lyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In! Her nationally syndicated column, “Real Estate Matters,” appears in newspapers from coast-to-coast, and her Expert Real Estate Tips YouTube channel has nearly 4 million views. She is the managing editor of the Equifax Finance Blog, publisher of ThinkGlink.com, and owner of digital communications agency Think Glink Media. In addition to her WSB radio show and WGN radio contributions, she is also a frequent guest on National Public Radio. Ilyce is a frequent contributor to Yahoo and CBS News.

]]>http://blog.equifax.com/real-estate/what-to-do-if-youre-rejected-for-a-mortgage/feed/1Live Like You’ve Lost Your Job (and Other Ways to Stick to Your Budget)http://blog.equifax.com/credit/live-like-youve-lost-your-job-and-other-ways-to-stick-to-your-budget/
http://blog.equifax.com/credit/live-like-youve-lost-your-job-and-other-ways-to-stick-to-your-budget/#commentsThu, 29 Jan 2015 19:38:26 +0000http://blog.equifax.com/?p=11797Trying to pay down your debt? Try a buy-nothing month. You’ll discover what you can live without and on how little you can really get buy. Here’s how to have a no-spend month of your own.
]]>Unless you bought all your holiday presents early, you probably spent more money than usual in December. To recover from the holiday gift glut, you may want to consider starting 2015 with a “buy nothing month” so that you can pay off any remaining holiday debt, save money for a special purchase, or build your savings, in general.

What is a buy nothing month?

Just as straightforward as it sounds, a buy nothing month entails cutting nonessential spending out of your budget. You take care of your normal bills, such as your rent or mortgage, utilities, retirement contribution, and loan payments, but you avoid buying luxury items, such as clothes, spa visits, meals at restaurants, and gifts. Ask yourself, “If I lost my job tomorrow, what would I cut?” Then, don’t spend on those items for the month.

For non-fixed essentials, such as gas and groceries, create a budget for how much you’ll spend. Then, stick to it as closely as possible.

Why should you try a buy nothing month?

Do you often spend without thinking? Do you rationalize reasons to buy? A buy nothing month can help you become more mindful about your purchases. In fact, a spending fast that lasts over a longer period of time can help you accomplish several goals: You may use the money you save to pay off debt, go on a vacation, jump-start a retirement savings account, or simply provide you with a sense of how much you can save in one month.

Old habits may die hard, but even if you only try it once, a buy nothing month will help you discover your weak spots—the places where you find it incredibly difficult to avoid spending. For example, drinking coffee from the office coffee pot this month instead of purchasing a latte every morning will help you figure out if it’s possible to quit that costly habit.

While there are certain items that you will only give up during this particular month, the process of doing so may help you identify areas where you can make lasting changes to the amount you spend. Overall, this exercise should help you to distinguish between those items you actually need and those you just want.

Here are four suggestions to help you get through the month.

1. Start with the basics: Planning

As with any budgeting activity, you should first figure out how much you usually spend each month. Reviewing your monthly financial statements for non-essential items is an important step because it will help you anticipate what you might need to cut.

In attempting to give up a spending habit, understand what triggers that spending and replace it with a different activity. For example, if you typically go to a bar with coworkers after work, try filling that time by going for a long walk or calling a friend. If you habitually shop online before you go to bed, watch a TV show or read a book instead.

Menu planning can take time and effort, but if you eat out regularly, cooking at home will most certainly save money. To keep your grocery bill reasonable, only buy the ingredients you need for meals. An astronomical grocery bill can put a dent in your savings.

2. Cash is king

Many people find that paying with cash reduces their spending because they physically see the money leaving their wallet, unlike when they pay with a debit or credit card. If you leave your credit cards at home and take out your allotted, non-fixed budget in cash at the beginning of the month, you will be able to see how much you can spend on a weekly basis. If you run out of cash, the extra trip to the ATM may delay your impulse buys.

3. Dude, where’s my car?

Reducing your mileage will help you save on non-essential spending and help your car last longer. Take one trip for errands per week and try to carpool to events. If you live in a city, figure out if any of your activities are within walking distance, and plan ahead so that you will have time to walk. You may not be able to live without a car, but chances are you can do without it occasionally.

4. Challenge family and friends

Your no-spend month will be tough, especially if you are used to spending money with friends or family. Consider asking your coworkers, roommates, siblings, and friends to take the challenge with you. It may be easier to meet your goals with support, and you will be able to brainstorm free entertainment activities, such as hosting a game night or hiking as a group.

Slashing your budget – even for one month – can also limit your activities, so don’t be surprised if you find yourself with more time than usual. Take the opportunity to develop some free hobbies, such as reading books from the library or learning about DIY decorating.

You may also want to use the time to make some extra cash. For example, you could de-clutter your closet and donate clothes that you don’t wear or research ways to sell your DIY crafts. Finally, you can take some of your newfound free time to decide what you will do with all the money you’ll save from your no-spend month and to learn about other money-saving strategies for the months to come.

Now, it’s your turn. Will you try a buy nothing month, and what will you be giving up? Have you tried a buy nothing month? What did you learn?

Ilyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In! Her nationally syndicated column, “Real Estate Matters,” appears in newspapers from coast-to-coast, and her Expert Real Estate Tips YouTube channel has nearly 4 million views. She is the managing editor of the Equifax Finance Blog, publisher of ThinkGlink.com, and owner of digital communications agency Think Glink Media. In addition to her WSB radio show and WGN radio contributions, she is also a frequent guest on National Public Radio. Ilyce is a frequent contributor to Yahoo and CBS News.

]]>http://blog.equifax.com/credit/live-like-youve-lost-your-job-and-other-ways-to-stick-to-your-budget/feed/2What $100,000 Buys You in Your Cityhttp://blog.equifax.com/real-estate/what-100000-buys-you-in-your-city/
http://blog.equifax.com/real-estate/what-100000-buys-you-in-your-city/#commentsMon, 26 Jan 2015 11:56:47 +0000http://blog.equifax.com/?p=11749Homeownership might feel out of reach, but you may be interested to learn that you can still find properties for around $100,000 across the country.

Nationally, home prices have risen 4.9 percent year-over-year, according to the latest S&P/Case-Shiller Home Price Index. While home values are predicted to continue to rise in the months ahead—albeit more slowly than they did in 2014—there are still deals to be had.

Whether you’re looking for an investment property or a place to call home, here’s an overview of what you can expect if you are looking to spend around $100,000 in six different metro areas.

Anchorage, Alaska

Alaska might not be the first spot on your list of desired locales, but many homebuyers flock here to enjoy its scenic beauty and the outdoor activities that come with it.

“Alaska is very highly sought after for military placement, especially to retire,” says Michael Droege, owner and general manager at Century 21 North Homes Realty in Anchorage.

Overall, Alaska home values have gone up 8 percent over the past year. According to Droege, Anchorage wasn’t as heavily affected by the recession as other areas of the country. Anchorage faced a 16 percent loss in value, whereas in the lower 48 states there was as much as a 50 percent drop.

“Today, we have made all that ground back up,” Droege says.

The average price of a home in Anchorage is around $360,000. The market has done well, Droege says, partly due to the stability of the government-driven economy, and it will be a competitive market for anyone looking to buy at around $100,000.

“At that price range, you’d need to buy a small condominium or head to markets north of Anchorage and be prepared for an hour drive,” Droege says.

The price increases are mostly due to a lack of inventory, Droege explains. The state of Alaska is the largest in the United States, but the Anchorage bowl area is running out of affordable, developable land. While on average in the United States, land is usually 20 percent of the overall home value, in Alaska, the land component comprises about 40 percent of the overall cost of a home.

Droege expects to see a 3 percent to 5 percent sales increase in Anchorage over the next year. He recommends looking at the Palmer or Wasilla markets for more affordable housing.

Atlanta, Georgia

Atlanta was hit hard by the recession but has moved into recovery mode, according to Todd Emerson, president of the Atlanta Board of Realtors. The market has cycled through the majority of the distressed inventory, and there are far fewer foreclosed homes available than there were 18 months ago, Emerson says.

“[Distressed homes] are now less than 5 percent, where it used to be 30 percent, because the investors really gobbled a lot of that up,” Emerson explains. As a result, the Atlanta market is less affordable than it was two years ago. Emerson says he’s even seen pre-recession prices in desirable areas, such as downtown. According to Zillow, the median sale price of homes in Atlanta is $226,500.

If you’re shopping for a home priced at around $100,000, you’ll most likely have to look as much as 45 minutes outside the city, in the suburbs. Emerson says this is a challenge for Millennials who want to work and buy a home downtown but who can’t find homes that they can afford.

“If they are willing to make a commute or sacrifice on the square footage, there are certainly plenty of opportunities,” Emerson says.

Dallas, Texas

Like other parts of the nation, the Dallas market is suffering from an acute lack of inventory. Dallas-area home prices are now more 12 percent higher than they were before the recession.

“The problem is that the buyer demand is outpacing the listings by leaps and bounds,” says Bill Head, director of communications for the MetroTex Association of Realtors.

The demand for homes is extremely high because of the influx of people moving into the area. Dallas’s economy remained relatively stable throughout the recession and has since attracted businesses and families looking for lower costs of living, Head says.

“A lot of municipalities have some flexibility to help companies relocate,” Head says. Over the next two years, for example, Toyota will relocate its headquarters—and around 4,000 employees—from California to Plano, Texas (a city near Dallas).

While job prospects are good, new homebuyers are going to need patience to find a home in Dallas, Head says. The competition is intense, especially for homes with new amenities that are move-in ready.

“When one of those homes goes on the market, it may already have several offers within the first few days, often higher than the listing price,” Head explains. The median sale price of homes in Dallas is $238,244, according to Zillow. Buyers in a lower price range may need to look outside the city.

“For a single family home for $100,000, I think it would have to be suburbs. There could be some condo home opportunities in the city possibly, but not city-center,” Head says.

Fresno, California

California has seen a price explosion over the last five years, and the median home price is just shy of $400,000. However, there are still areas of the state, such as Fresno, where you may be able to buy a home for a little more than $100,000.

“We are very affordable compared to Los Angeles, and we’re home to lots of recent college graduates or first-time buyers,” says Elizabeth Kuchinski, a seasoned Fresno realtor with Century 21 C. Watson.

Affordable for California may be a little different than the rest of the country. You can get a home in Fresno for around $180,000, Kuchinski says. She adds that the economy is improving, and there’s a good surplus of homes available. The short sales and foreclosures have almost disappeared, but the interest rates are still at record lows.

“It’s a great time to buy,” Kuchinski says, but you may have to look outside the town center if you’re on a strict budget. If you’re fixed on California, however, Fresno may be one of the most affordable regions for housing.

Kailua-Kona, Hawaii

Hawaii is not your typical market but it still sees a cyclical pattern, according to Kevin McCabe of Re/Max Brokers in Kailua-Kona.

“It goes up and down, but right now we are in a recovery period, and prices have been increasing over the past few years,” McCabe says. The median sale price has increased about 20 percent since 2012, and home values have gone up 9 percent in the past year. Most buyers are mainland retirees who have saved up for a change of pace.

“We don’t really have an industry here that’s attracting people, so buyers are usually people over 60 who have already made their money,” McCabe says. Inventory is also a unique challenge for the Kona market because there’s almost no new construction.

“People who move here often love it for the first three or four years, and then they want to go back to a normal life or where there’s family,” McCabe explains, “so we’re just reselling the whole thing.” The lack of advanced medical care is often a challenge for retirees, he says.

In this market, $100,000 likely won’t get you much, especially in Kona, which is where most of the resorts and tourist attractions are located. The median price of homes sold in Hawaii is $452,000.

“It would be a very small house and on the other side of the island,” McCabe says.

New York, New York

According to veteran real estate agent Dawn Carpenter, the New York City market has come back vibrantly since the recession. The median price of homes that sold in New York City is $487,850, up from $463,000 in 2012, according to Zillow.

“What was a buyer’s market a year or two ago has changed to a seller’s market,” Carpenter says. Realtors are also seeing a lot of international buyers come in to the area. New York City home values have gone up 10 percent over the past year, and Zillow predicts they will rise 3.4 percent within the next year.

“We’re a destination spot,” Carpenter says, “Who wouldn’t want to live in New York City?”
The good news is that buyers can still find an affordable one-bedroom condo in the $100,000 range in the outer boroughs, such as Queens or Brooklyn.

“It’s going to be a small condo, but you can still jump on a train and be in Manhattan in 15 minutes,” Carpenter says. For a larger place, such as a two-bedroom condo, buyers will need to look farther out, such as to Staten Island.

“Staten Island has really taken off—we’ve got a new brewery going in, a Ferris wheel, and restaurants,” Carpenter says. For buyers looking at shore properties, Superstorm Sandy has made life more difficult. Buyers have experienced issues with insurance fees and flood coverage, Carpenter explains. Be prepared for higher costs on coastal properties.

Depending on where you want to buy, you may be able to find your new home for less than you think. Of course, make sure you know into what kind of house you are stepping into. If you’re considering a property priced well below average, make sure you understand why. Some homes are inexpensive because they’re located in less-than-desirable areas—something you can’t change—or because they’re in need of major and expensive repairs that will become your responsibility.

Ilyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In! Her nationally syndicated column, “Real Estate Matters,” appears in newspapers from coast-to-coast, and her Expert Real Estate Tips YouTube channel has nearly 4 million views. She is the managing editor of the Equifax Finance Blog, publisher of ThinkGlink.com, and owner of digital communications agency Think Glink Media. In addition to her WSB radio show and WGN radio contributions, she is also a frequent guest on National Public Radio. Ilyce is a frequent contributor to Yahoo and CBS News.